The Fair Trade Debate

We went to a debate on fair trade last night, which featured an economist called Peter Griffiths, who has worked in the developing world and written a book about it. He was very critical of fair trade as a concept, blaming it for various economic ills and for being “dishonest”.

Now it’s tempting to just dismiss his views on fair trade as those of an arrogant idiot, and certainly that’s the persona he put across, and move on. But the problem with idiots is that they tend to be noisy and promulgate their idiocy aggressively. So, here are some of the basic things Peter Griffiths got wrong last night.

1) He characterised “the fairtrade” as one homogenous movement with one website and one point of view. But it’s a bit more complicated than that.

There is not one business model, not one monolithic outlook, not one dictated point of view. It is a heterodox movement, of many trading and education organisations, in both the developed and the developing world. To attack the concept of fair trade as not relying on statistics, of not presenting facts, of being dishonest in the way it presents itself, on the basis of visiting one website (as Peter Griffiths implied was his basis for his attack) is at best naïve, or at worst willfully ignorant.

2) He was factually inaccurate.
“The first thing the fairtrade says is that it will only deal with co-operatives.” Rubbish. Fair Do’s isn’t a co-operative. As a Director there, I’m a director of a Limited Company. We trade with some co-operatives, charities, other limited companies, small family-run business, sole traders and Traidcraft who are a PLC. When he states nonsense as fact, Peter Griffiths shows he doesn’t know what he’s talking about when he talks about “the fairtrade”.

3) According to Peter Griffiths, “the fairtrade” is primarily agricultural and is a food-oriented issue and that keeps people in poverty, ergo “the fairtrade” is bad for people.

Visit our shop, Peter, and you’ll see that we sell crafts and low-tech produced goods, like soap. The reason many fairly traded goods are agricultural produce is because there are hideously unfair trade barriers and tariffs, which prevent value-added products from being exported to the developed world.

These trade barriers are designed to protect Western jobs and keep the developing world reliant on trading agricultural products. It’s not the fault of “the fairtrade” that the EU, America and various other powerful nations limit what developing world countries can export. As an economist, you should really know that.

4) Also, according to Peter Griffiths, paying fair prices stimulates over-production, which results in lower prices for everyone else, thereby causing a greater social evil. This is one of the main things he accused “the fairtrade” of being dishonest about.

But as another panelist said, the power of fair trade organisations to influence global productivity, pales in comparison to the power of large multinational companies and the Western governments the multinationals use as stooges.

5) On that note, coffee is a price-volatile commodity. So, how does the guaranteed price offered by most fair trade organisations cause price volatility? Stabilising prices should surely have the opposite effect, unless “the fairtrade” is a convenient scapegoat for Western corporate greed.

6) Peter Griffiths described co-operatives as a ‘dirty word’ in the developing world as they are ‘inevitably corrupt’.

“The guy doing the books has never seen thirty quid before in his life, so it goes into his pocket…. If, as a co-operative manager you don’t take the kickback, someone else will.” Those statements didn’t go down at all well with the chap who was at the meeting and who works for a co-operative in the Windward Isles.

Let’s not be so naïve as to say that corruption doesn’t occur in co-operatives, but come on, Peter. Describing everyone who works in a co-operative as a thief-in-waiting is slander. Our own hands aren’t so clean. Not long ago the EU had to shut down for several months while it investigated internal corruption. And many farmers say they value being in a co-operative because of the open-ness, the transparency, the regular audits, and they know what everyone else is getting and whether it’s being fairly distributed.

7) Anecdotes aren’t evidence. Peter Griffiths railed against the dishonesty of “the fairtrade” and the lack of fact-based evidence. But then based his slurs about co-operatives on his own (negative) experiences. He presented no stats to back up his 'facts'. He offered no hard evidence.

8) Saving money is only half the solution. Peter Griffiths trumpeted how he had saved millions of pounds for developing world governments in food programmes and the like. Well done.

But saving is one thing, earning is another. If I go to town and buy a bargain I might have saved £20, but I will still have spent money. Enabling people to spend more efficiently is a good thing, but the bottom line is you are still helping them spend. And the money you save is just figures on one side of a balance sheet.

Trading fairly with people, on the other hand, enables them to earn. They end up with real money, which they can then choose to freely spend on the goods and services they need. Freeing up capital in the developing world to stimulate local economies is the great boon of “the fairtrade”. The savings Peter Griffiths has made won’t ever be spent, because they’re only numbers in a ledger, not real dollars in a pay packet.

9) And finally, Peter Griffiths attacked the whole of the “the fairtrade” as unprofessional and incompetent. Well, if I can return the favour and tar all economists with the same brush, I’d like to say this: economists like Peter Griffiths have had billions of pounds of resources from various institutions to sort out global poverty and decades to do it in.

And so far, they haven’t delivered.

Peter Griffiths may not like fair trade, he may even have valid criticisms to make, but compared to the mess economists have made in Africa, for example, the ‘damage’ caused by “the fairtrade” is negligible.

What fair trade as a method of business has done is bring real change to poor and marginalised communities, provided sanitation, education, security, health and wealth. It has given people benefits today and the hope for a brighter tomorrow. And it has done this, generally, as a grass roots movement, in the face of opposition from powerful institutions and governments. It has succeeded against the odds because it has proven that there is another way to do trade. And, frankly, it has rendered the opinions of economists like Peter Griffiths about “the fairtrade” irrelevant.

A final note.
When I was a kid we lived in a country in West Africa. Economists from various international bodies like the IMF and the World Bank, almost all of whom were white Westerners like Peter Griffiths, advised the government to stop people growing maize and to grow rice instead. Now thirty years later, that country has to import rice and other food to prevent its people starving to death.

When it was obvious that the switch to rice wasn’t working, the economists encouraged the government to promote peanut harvesting instead. And they said the same things to every other West African country. When we returned to the UK, the value of the peanuts which were being harvested was less that the value of the sacks they were being sold in.

Those are anecdotes, not evidence, although you can look it up if you like, to check out whether I’m lying or not. But, those stories indicate, perhaps, why I don’t really rate the opinions of ‘development economists’. The advice of economists destroyed that country and kept it impoverished. So forgive me for trying to find a better way to make life better for people.